The gold price traded within a six or seven dollar range most of the Tuesday trading day...and finally broke above Monday's close just minutes before trading ended on the Comex at 1:30 p.m. Eastern time. The ensuing $5 rally allowed gold to close the day at a new record high price in the thinly-traded New York Access Market.

Although gross volume was enormous...most of it was roll-overs out of the August contract...the net volume was pretty light.

The big feature on the gold chart below is the monster spike in gold [the light blue trace] on the Kitco gold chart below that occurred at the open of trading on Sunday night in New York. This is what JPMorgan et al had to throw the kitchen sink at it...as the price was obviously headed for the moon and the stars...so they showed up as sellers of last resort against all the new longs pouring into the market in early Far East trading. This broke the rally's back.

The silver price spent most of Tuesday trading in a twenty cent range around it's Monday night closing price of $40.39 spot. The low of the day [$39.92 spot] came around 10:40 a.m. in New York...and by the close of electronic trading at 5:15 p.m. it was up a dollar from its low of the day...and up 52 cents from its Monday close. Volume was very decent.

Here's the 2-day dollar chart. It opened the Tuesday trading day around 74.10 cents...and hit its zenith a few hours after that. Then it fell about 65 basis points in about six hours. From there, the dollar continued to work its way slowly lower in price...finishing down about 60 basis points on the day.

As I pointed out in my closing commentary on Tuesday, there was virtually no trace of this waterfall decline in the dollar to be found in the either the silver or gold charts during that time period.

The stocks worked their way generally higher...and finally broke into positive territory with some conviction on the gold rally that began shortly before the Comex close at 1:30 p.m. Eastern time. But, despite the fact that gold closed on another record high, the stocks got sold off into losing territory for the second day in a row on its second new record high price in a row. The HUI finished down 0.06%.

Despite a nice jump in the silver price, the shares did poorly once again...and Nick Laird's Silver Sentiment Index closed down 0.40%

(Click on image to enlarge)

Well, I must admit that I'm underwhelmed...and somewhat apprehensive...about the performance off the precious metal shares. And I'm also somewhat suspicious...more than somewhat suspicious, actually...of these sell-offs in the share price in the hour or so before the close that takes the shares from a positive close, to a negative close. This happened on both Monday and yesterday...and I'm wondering if someone is painting the tape.

The CME Daily Delivery Report was a bit of a surprise yesterday. It showed that 17 gold, along with zero silver contracts, were posted for delivery on Thursday. When the heck are the 267 remaining July silver contracts going to get delivered? The vast majority of them better be in today's report, or things could get very interesting very quickly.

There were no reported changes in GLD yesterday...but SLV reported receiving 779,589 ounces of silver.

Another thing of note regarding SLV. The new report on the short position in SLV shares came out yesterday. It showed a decline of 2.17 million shares sold short. The short interest in SLV is now down to 31,260,600 shares...and not a single one of these shares has any silver backing it all. Ted Butler has been up in arms about this for many months now...and rightly so.

The U.S. Mint had another sales report yesterday. They sold a whopping 15,000 ounces of gold eagles...bringing their monthly total up to 60,000 ounces of gold eagles sold so far this month. They didn't report selling any 24K gold buffaloes or silver eagles.

There was pretty big action over at the Comex-approved depositories on Monday. They didn't receive any silver...but reported shipping 1,031,298 troy ounces of the stuff out the door. The link to that action is here.

Here's a 3-paragraph quote from Bill Buckler's bi-weekly publication The Privateer that was sent out to subscribers early on Sunday...and there are few that can cut to the chase as quickly as Mr. Buckler...

"The fuel to keep the global financial system functioning does not stop at the borders of the US. The “Dodd-Frank Wall Street Reform and Consumer Protection Act” has just produced the first ever “audit” of the US central bank. It reveals that in the period between December 2007 and July 2010, the Fed parceled out $US 16.1 TRILLION in emergency loans to financial entities all over the world. Almost half of this - a total of $US 7.75 TRILLION - was loaned to four US banks. They were Citigroup, Morgan Stanley, Merrill Lynch and the Bank of America. In July 2010 [the cut off date for this “audit”], total US stock market capitalisation was $US 15 TRILLION. The Fed provided about half of that.

"This inflationary explosion is unprecedented in any era. It represents the biggest ever effort to rescue a debt-based system from the ravages caused by its own debt issuing excesses. It has, at best, provided a “remission” for global paper markets. The cost has been devastating for REAL economies everywhere.

"A cancer patient who goes under the knife gets the malignant disease physically removed. If all traces of the malignancy are removed, the patient will recover. If all goes well, the recovery will be permanent with no “remissions”. A life-threatening malignancy is NOT fought or cured by doing everything possible to increase its power and potency. Yet that is what financial authorities in the US and everywhere else have been doing in regard to the life blood of their economies. As this stark fact becomes ever clearer, Washington DC and Wall Street stand helpless before the fact that they can only cure the economy at the cost of killing the financial system which is feeding on it. It’s THAT simple. - Bill Buckler...The Privateer...July 24, 2011 [Emphasis is mine. - Ed]

Washington state reader S.A. sent me this very interesting graph yesterday. The preamble from the graph is pretty self-explanatory.

(Click on image to enlarge)

¤ Critical Reads

FHA May Be Next in Line for Huge Bailout

Here's an op-ed piece that showed up over at Bloomberg on Monday.

The FHA has some major accounting problems. Left unaddressed, they could spook the markets, lead the FHA to seek a federal cash infusion and further enrage taxpayers. These outcomes can be avoided -- but only if policy makers are more transparent about the risks involved in guaranteeing mortgages.

So how has the FHA fared financially in serving borrowers with low down payments? As the housing bubble burst in 2007, and the number of mortgage-related defaults started to climb, the FHA’s capital reserves declined to $3.5 billion from $22 billion.

This means that the FHA is on the verge of requiring a bailout to support its outstanding mortgage guarantees, which are projected to exceed $1 trillion in 2011.

I thank Washington state reader S.A. for sending this story along...and the link is here.

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California Secures $5.4 Billion Loan From 8 Banks

Washington state reader S.A. has two more stories for us today. This next one was posted over at The New York Times yesterday.

California has lined up a $5.4 billion loan from a group of eight banks led by Goldman Sachs as an emergency cushion if the credit markets are disrupted by a failure to raise the debt ceiling, the state’s treasurer announced on Tuesday.

The bridge loan is meant to tide California over if it cannot sell $5.4 billion worth of bonds that would cover some of the state’s bills.

The link is here.

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SEC Will Track Biggest Traders’ Activity

I ran a story in my Saturday column about the high frequency traders trying to polish up their rather tarnished image. Well, it obviously didn't work out too well.

The U.S. Securities and Exchange Commission will impose a system to monitor the behavior of high- frequency trading firms and hedge funds under new reporting standards for the most active market participants.

SEC commissioners voted 5-0 today to adopt a tracking system for firms that buy and sell at least 2 million shares a day or meet other volume standards. The system, initially proposed three weeks before the May 2010 crash that temporarily erased $862 billion in U.S. share value, aims to help guard against market abuse and manipulation.

This Bloomberg story from yesterday is Washington state reader's third contribution to today's column...and the link is here.

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Pressure builds on Spain and Italy over debts

Just five days after European authorities unleashed a €159bn [£141bn] aid package designed to prop up the eurozone, Spanish and Italian bond yields yesterday soared on concerns over sovereign debt.

Spain's short-term cost of borrowing hit three-year highs. At an auction of Spanish government debt demand fell, while yields at a sale of six-month Italian paper hit their highest since late 2008.

Traders said the markets were now unconvinced that the authorities have done enough to prevent a meltdown of the euro.

This Roy Stephens offering is from a story from this morning's edition of The Telegraph...and it's definitely worth reading. The link is here.

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Marc Faber Interview: King World News

Yesterday I posted part of this interview as a KWN blog that Eric sent me. Now the entire audio interview is available for your listening pleasure...and the link is here.

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Gold Futures Advance on Haven Demand Amid Prolonged U.S. Debt Stalemate

Gold futures rose for the third straight session as the prolonged U.S. debt stalemate boosts demand for the precious metal as a haven.

The dollar fell against a basket of six major currencies and U.S. equities declined as lawmakers offered competing plans on raising the $14.3 trillion debt ceiling. Gold has jumped 7.8 percent this month amid fiscal woes in the U.S. and Europe.

“The flight-to-quality money is reasserting itself into gold,” Adam Klopfenstein, a senior strategist at Lind-Waldock, a broker in Chicago, said in a telephone interview. “The budget problems are persistent, and people want to own gold during this calamity.”

This short Bloomberg piece from yesterday is also courtesy of Roy Stephens...and the link is here.

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Charting David Rosenberg's Thesis: "No Gold Bubble Until $3,000"

There is, however, one section that is unique: that dealing with gold, and more specifically, why in Rosenberg's opinion gold is still quite cheap and why it is trading at about 50% of what the Gluskin Sheff strategist would consider bubble value. As Rosie says: "we have liked gold for a long time and we remain very constructive. It is more than just a hedge against recurring bouts of global financial volatility. The growth rate of gold production is roughly stagnant while the growth rate of fiat currency in most parts of the world continues to accelerate. It's all about relative supply curves - the supply curve for bullion is far more inelastic than is the case for paper money. It really is that simple."

David Rosenberg is with the Toronto firm of Gluskin Sheff...and there are no flies on him. I thank reader U.D. for this zerohedge.com posting from yesterday...and the link is here.

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Massive Shortage of Available Physical Gold & Silver: John Embry

Here's a longish King World News blog that Eric sent me yesterday. It's with John Embry over at Sprott Asset Management. This is an absolute must read...and the link is here.

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Bullish on Silver

Doug Hornig over at Casey Research has an interesting commentary on silver imbedded in yesterday's edition of Casey's Daily Dispatch. You have to scroll down a little to get to it...but it's a must read...and the link is here.

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Expect Tremendous Global Inflation: Peter Schiff

King World News has interviewed Peter Schiff, CEO of Europacific Capital. Eric sent me the blog in the wee hours of this morning...and the link is here.

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Time for an accurate accounting of Germany's gold: James Turk

Here's a GATA release...and I'm going to leave the entire introduction in the more-than-capable hands of my colleague, Chris Powell. The headline says it all...and the link to this absolute must read commentary by James and Chris...is here.

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The fact that we are here today to debate raising America's debt limit is a sign of leadership failure. It is a sign that the US Government can not pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government's reckless fiscal policies. Increasing America's debt weakens us domestically and internationally. Leadership means that, "the buck stops here.' Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better. - Senator Barack H. Obama...March 2006

As I mentioned at the top of this column, gold volume was immense yesterday, but once all the roll-over out of the August contract were taken out, the net volume was a far more sedate 93,000 contracts. The preliminary open interest number showed a rather smallish increase of only 5,506 contracts, so the final number should make most of that preliminary o.i. number disappear.

The final open interest number in gold for Monday's trading day showed an increase of 6,742 contracts. That's down quite a bit from the preliminary number, but I'm still not happy to see it, as it means the bullion banks, as sellers of last resort, are still shorting every long contract placed.

Silver's net volume yesterday was a fairly chunky 46,000 contracts...but the preliminary open interest number was up a whopping 4,833 contracts. I'd like to think that there were a lot of spread trades in there, but we won't get a hint of that until the final o.i. number later this a.m...and we won't know for sure until Friday's COT report.

I was expecting rather neutral final open interest number in silver for the third day running...and that's what the CME reported...as Monday's final o.i. number in silver showed a tiny decline of 56 contracts. It's obvious that the Commercial traders are avoiding the short side of the silver market...and I'm more than curious to know what the Commitment of Traders Report will show for silver on Friday.

Whatever the Tuesday's final open interest numbers that are reported by the CME later this morning, they will show up in Friday's COT report...as yesterday [at the close of Comex trading] was the cut-off for that report.

July open interest in silver only fell by 22 contracts yesterday, which leaves 267 contracts still to be dealt with before the close of business tomorrow...and the CME reported that there were no silver deliveries at all yesterday. With only two days left, the shorts are really taking this down the wire.

Yesterday was options expiry. There were a lot [around 16,000 contracts] of option holders that found themselves in-the-money after options expiry...and if they chose to do so, they can now convert these options contracts to Comex futures contracts, and stand for delivery. We'll see how this all plays itself out in the days ahead.

As I mentioned further up, I was none to happy about the fact that the gold and silver stocks got sold off late on Monday and Tuesday...and ended up finishing in negative territory on both days. I don't know whether this was free-market action...or someone trying to paint the tape. The technical traders are always looking out for non-confirmations...especially when the underlying asset is rising...and it's corresponding share price is falling.

Here's the 6-month HUI chart...and it's looking decidedly toppy in the short term...with the last two trading days being icing on the cake for a technical trader...especially that 'negative hammer' on Monday. This bears watching.

(Click on image to enlarge)

Here's the 6-month gold chart. We are back into overbought territory once again.

(Click on image to enlarge)

Here's the 6-month silver chart. We're not in overbought territory just yet, but getting there.

(Click on image to enlarge)

Does this mean that a sell-off is imminent? Don't know...as we could certainly power higher from here...perhaps quite a bit higher. But the bullion banks' short position in gold is getting up there...and the COT report is not the friendliest, but it's not extremely bearish, either. And if JPMorgan et al can engineer a sell-off in gold, they'll certainly be going after silver price as well.

But one thing I can tell you, is that when the bullion banks finally have all the mice in the trap they think they can get, then this sell-off should be looked at as buying opportunity...as it certainly will be for me. If/when it does happen, I'll be buying this dip aggressively with what money I can scrape together.

Friday's Commitment of Traders Report will shed much more light on this situation...and I'll report on that on Saturday.

Gold spent most of Far East trading up three or four bucks...and its feeble attempt to break through $1,625 spot got quietly sold off. Silver's attempt to blast above $41 at the London open got smacked down immediately...and the silver price is now safely back below $41 spot, at least for the moment.

Gold's net volume [as of 4:27 a.m. Eastern] once all the roll-overs are removed...is microscopically small. There are only two days left for all traders holding August contracts to either sell, roll, or stand for delivery on Friday...so these next two trading days in gold are going to be pretty frantic.

Silver's high frequency trading volume is already very chunky for this time of day...so it's obvious that the spike up in price at the London open was met with ferocious selling. Without doubt, Wednesday's final open interest number will show further deterioration, as JPMorgan must have had to throw a lot of short contracts at the silver price to prevent if from blowing sky high at that point.

It should be another interesting trading day in New York again today...and I can pretty much guarantee that the rest of the 'summer doldrums' in the precious metal markets will be anything but...as there are still about five weeks of summer left. So I'd put on some popcorn...and blow the froth off a cool one, because what's left of summer could really be interesting.

That's it for today...and I'll see you here tomorrow.